Derin Clark

Derin Clark

Online Reporter
Published: 05/11/2019

There has been an increase in SMEs looking to borrow money to finance growth in the first half of 2019, according to a report by the BVA BDRC SME Finance Monitor.

In the report it is revealed that nearly half (46%) of SMEs were using external finance in the first half of 2019, up from 36% in 2018, with an increase in small businesses using overdrafts, increasing from 19% in 2018 to 23% in the first half of 2019, and credit cards, increasing from 14% to 19%. This has led to the proportion of businesses using finance (46%) now exceeding the proportion that are not (41%), which is the first time this has happened since 2014.

Shiona Davies, director at BVA BDRC, said: “Use of finance has increased, yet appetite for finance and new application remains limited. Most applications are made to the main bank for loans or overdrafts, and most of those who apply are successful, but there are signs of more SMEs considering self-funding alongside, or instead of, an application for finance. Future appetite for finance remains stable, although an increasing minority of SMEs are looking to reduce their use of external finance.”

Business loans

This week, the Bank of England released a report that found businesses taking out new loans are being hit with the highest interest rates in a decade, with the average interest rate on new loans rising from 2.56% at the end of August to 3.05% at the end of October.

In addition to this, according to accountants and business advisers, Moore, the value of loans offered to small businesses last year (to 30 June 2019) through the Enterprise Finance Guarantee (EFG) programme has fallen to a record low of just £226m.

Business loans

This week, the Bank of England released a report that found businesses taking out new loans are being hit with the highest interest rates in a decade, with the average interest rate on new loans rising from 2.56% at the end of August to 3.05% at the end of October.

In addition to this, according to accountants and business advisers, Moore, the value of loans offered to small businesses last year (to 30 June 2019) through the Enterprise Finance Guarantee (EFG) programme has fallen to a record low of just £226m.

SMEs could be losing out on interest rates

Small businesses with money languishing in low-interest accounts are being encouraged to consider changing accounts to those offering higher rates.

According to a report from the Centre of Economic & Business Research, commissioned by Flagstone, the estimated £199bn held by SMEs in instant access accounts and receiving an average rate of 0.41% would generate £578m in the coming year. However, by switching to the market-leading instant access rate of 1.40%, they would earn £2.8bn in interest, £2.2bn more than is currently expected.

Drop in business savings

In other business news, research by Hampshire Trust Bank has found that, due to the current economic uncertainty, business savings are down while money deposited in current accounts is up. The research found that business savings have declined over the last two years as SMEs look to pay down loans and invest in the future. On average, UK SMEs have £429,000 in their business savings account. However, in contrast to the 2017 data, the average amount held in business current accounts is up, with an average current account balance of £726,000, a staggering 78% increase.

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